16 February 2007
Organisations wishing to challenge contracts awarded by public bodies have been able to do so on the basis of judicial review. Not any longer, it would seem, if the decision to tender had been voluntary
Aggrieved bidders in a major tendering exercise are a fact of life for all public bodies. A more recent phenomenon has been the ability of the public or of special interest groups to challenge a tendering exercise through judicial review actions.
Perhaps the first example was in 2001, when a community group challenged Rhondda Cynon Taff council over the tendering process used for a Private Finance Initiative project. The council won on the facts and the judge expressed a suspicion that the main reason for the challenge was a delaying or spoiling tactic rather than concerns over the way the exercise was conducted.
Stories have been increasingly emerging of various organisations, such as environmental groups, using the Freedom of Information Act 2000 to obtain details about tendering exercises, in the knowledge that these complex processes are vulnerable to challenge. While aggrieved bidders have their own special remedies under the procurement rules, the public and environmental groups have to bring any formal legal action by way of judicial review.
Now recent case law has indicated that the courts will need to be satisfied that there is truly a matter of public law and it is not the commercial aspects of the project that are being challenged.
In the past of course, there were statutory tendering regimes, which allowed aggrieved bidders to argue that a public body had failed to comply with the rules. For example, in 1993 Birmingham City Council awarded a waste treatment contract to Onyx (now Veolia). The council
was required to outsource the activity under the Environmental Protection Act 1990, which mirrored the old Compulsory Competitive Tendering rules.
An aggrieved bidder, Mass Energy, argued that the council did not properly follow the statutory procedure and therefore the award of the contract to Onyx should be declared void.
The first question considered by Lord Justice Glidewell in the Court of Appeal was whether or not the matter was judicially reviewable at all. He said that it was, but only because the council was subject to the statutory regime under the Act. He specifically stated that: 'If the council had sought voluntarily to enter into a contract by tender, deciding to adopt that process of its own volition, then in my view there would be no public law element in such a dispute at all.'
Basically, the judge was saying that the dispute was primarily a discretionary matter, relating to a commercial decision.
Judicial review allows interested parties to object to a public law decision on the basis that the decision-maker has acted outside of the organisation's statutory powers or in a manner that is totally unreasonable or irrational. One attraction of the remedy to interest groups is that they do not have to suffer loss by the council's actions. Judicial review opens up all statutory decisions to potential challenge.
The matter has been looked at afresh now that the old statutory tendering regimes have been removed. One case concerning wind farms cropped up in 2006. Gamesa Energy UK brought an action against the National Assembly for Wales and the Forestry Commission, arguing that there was a breach of tendering practice in the way it was excluded at the pre-qualification stage.
The court had to consider again whether the challenge was amenable to judicial review or whether it lacked the necessary public law element. Counsel for the Welsh Assembly naturally referred to the statement by Glidewell in the Mass Energy case. Having considered lengthy submissions from both counsel on the point, the judge said matters boiled down to whether or not there was a 'sufficient element of public law' in the decision-making. Here he did not think there was.
In reaching his decision, he indicated that the pre-qualification process was not one that had to be undertaken under any statutory provision. Instead, provided the process was carried out in good faith and without corruption etc, this was a matter that fell within the discretion of the authority rather than statutory controls.
'As a matter of judgement on the facts in this case and within its overall context… I do not go so far as to say that a public law challenge to a tendering or pre-qualification process on the basis of irrationality could never be entertained,' he said. 'I think that the circumstances under which it could be entertained must be rare'.
Although the case leaves a chink of hope to argue that there is a public law element in voluntary tendering, it goes a long way to accepting the point made in 1993. Outside of a statutory regime, tendering is a purely commercial matter.
Stephen Cirell is head of local government and Professor John Bennett is a consultant solicitor with Eversheds. They are co-authors of Best Value law and practice, published by Sweet & Maxwell. Professor Bennett is also co-author of EC public procurement law and practice
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